Dozen rules for bull markets (Very best time to buy the very best stocks)
1. Earnings per share in the latest quarter should be up at least 25% versus the same quarter a year ago. Profitability affects a stock price the most.
2. Earnings growth should be accelerating at some point in recent quarters compared with earlier rates of change.
3. Annual earnings for the past three years should be increasing at a rate of 25% per year or even more.
4. Sales should be up 25% or more in one or more recent quarters, or at least accelerating in their percentage change for the last three quarters.
5. The after-tax profit margin in the most quarter should be either at or at least close to a new high and among the very best in the company's industry.
6. Return on equity should be 15 to 17 percent or higher.
7. Technology companies should show cash flow earnings per share greater than regular earnings.
8. In normal bull markets, both the earnings per share and relative strength ratings should in most cases be 90 or higher.
9. The stock's industry group should rank in the top 10 or 20 among the 197 groups tracked by Investor's Business Daily.
10. The stock should have institutional sponsors - such as mutual funds, banks and insurance companies - and the number of mutual fund sponsors should be increasing quarter by quarter for several quarters.
11. It's usually a plus if the economy is buying back its own stock - preferably 5 to 10 % or more.
12. It's vital in any stock you buy that you really understand the story of the company.
